Treasury audit reveals Sh5.8bn fraud

Monday June 13 2011

Deputy Prime Minister Uhuru Kenyatta. Photo/LIZ MUTHONI

Deputy Prime Minister Uhuru Kenyatta. Photo/LIZ MUTHONI 

By JAMES RATEMO ([email protected])

Kenyan education officials channelled KSh4.2 billion through unregistered schools and unofficial accounts, a Treasury audit report has revealed.

The Ministry of Medical Services is also on the spot for misappropriating funds meant for drugs procurement by Kenya Medical supplies Agency (Kemsa).

The fraud cases have been forwarded to police for further action.

Releasing the report on Monday, Deputy Prime Minister and Finance Minister Uhuru Kenyatta said KSh1.9 billion meant for schools was diverted.

He said a large percentage of the misused education funds are related to physical infrastructure.

The total amount of misappropriated funds has however reduced from the original figure of KSh8.2 billion.

“The audit discovered a discrepancy relating to financial monitoring reports amounting to KSh2.27 billion which was not matching with the ministry’s cash books or bank account balance,” said Mr Kenyatta.

The forensic trail revealed an attempt to cover up the discrepancy through manipulation of the cash books. The details of how it happened and the individuals involved are available,” Mr Kenyatta said.

Accounts

According to the audit, additional evidence obtained from the dispatching bank disclosed that the funds had either been paid to institutions which were not registered or the school bank accounts into which disbursements were made were not genuine bank accounts.

Mr Kenyatta said the forensic trail revealed the individual account numbers and details to which the returned funds were deposited and later withdrawn.

“Some of the funds totalling KSh3.1 million were deposited in bank accounts for schools which did not have TSC codes implying that the schools were not officially recognised. The money was subsequently withdrawn by individuals whose particulars are available,” said Mr Kenyatta.

The audit report is an update on progress made in addressing governance challenges in the Kenya Education Sector Support Programme since December 2010 following the fraud revelations that saw development partners freeze funding to the Education sector.

The audit was carried out between April and September 2010.

On the pending bills at the Kenya Medical supplies Agency the audit revealed that the Ministry of Medical Services transferred to the agency sh0.8 billion against a budget provision of KSh2.9 billion.

“The audit points to failure by the Ministry of medical Services to transfer funds meant for drugs procurement as the main cause of the pending bills at Kemsa,” revealed Mr Kenyatta.

The report also highlights significant weaknesses in the internal control framework, transparency accountability and governance mechanisms at Kemsa and failure to adhere to the statutory procurement procedures.

Mr Kenyatta said though the pending bills audit report on the Ministry of Medical Services was concluded and forwarded to the Kenya anti corruption Commission in 2008, the pace of investigations has been slow..

“We are handing over a copy of the same to the police for further investigation and prosecution. We urge that that file be handled with expediency,” said Mr Kenyatta.